The timing is admittedly awkward for Israel, given that its electricity company has been negotiating gas purchase agreements with the companies developing Tamar at the same time as the Knesset passed a law imposing higher taxes and royalties on profits from the fields. Now -- with the energy companies aware that Israel needs their gas supplies more than ever before -- the electricity company's bargaining position has weakened significantly.
But in the longer term, the picture is bright. Even without Tamar, the Leviathan gas field alone -- found in 2010 and due to enter production in 2017 -- could supply increasing Israeli demand up to 2030 and still have a 20-year reserve remaining. With significant remaining exploration potential, Israel could therefore become a major exporter. Energy-poor Jordan is a likely market; the Hashemite Kingdom is already set to lose $2.1 billion this year due to the pipeline bombings. The other countries on the eastern shore of the Mediterranean, Syria and Lebanon, are obviously not possible customers for Israel, barring a seismic political realignment. Iraq should be the major supplier for these countries, but Baghdad is locked in a lengthy internal debate concerning gas requirements for domestic use.
In a remarkable role reversal, it is even conceivable that Israel could end up sending gas to Egypt. Or Israel may expand its share in the European market by becoming a significant LNG exporter in its own right, perhaps via Cyprus, which enjoyed a significant discovery of its own last October. Either way, Israel draws its neighbors closer into its economic orbit, while at the same time diminishing Egypt's role. This will also strengthen the determination of Lieberman and Prime Minister Benjamin Netanyahu to press ahead with offshore gas development despite territorial disputes with Lebanon and Turkey (via the conflict over the divided island of Cyprus).
The cancellation of the unloved gas deal should not be overplayed as a token of hostility from the new Egypt toward Israel. But it does remove one plank of their already shaky economic cooperation. And it demonstrates that, under its current leadership, Egypt's political and economic clout is further dwindling at the very moment that Tel Aviv has landed an unexpected windfall.
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